UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21399
-------------------------------------
The Aegis Funds
- -----------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1100 N. Glebe Road, Suite 1040, Arlington, VA 22201
- -----------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
William S. Berno, 1100 N. Glebe Rd., Suite 1040, Arlington, VA 22201
- -----------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (703) 528-7788
-------------------
Date of fiscal year end: 12/31
------------------
Date of reporting period: 12/31/04
-----------------
ITEM 1. REPORTS TO STOCKHOLDERS
Aegis High Yield Fund
First Annual Report
December 31, 2004
Shareholder Letter
February 18, 2005
To the Shareholders of the Aegis High Yield Fund:
We are pleased to present the Aegis High Yield Fund First Annual
Report, for the year ended December 31, 2004.
We want to take this opportunity to welcome all of our new shareholders to
the Fund. We are quite excited about this new offering and greatly
appreciate your support. At any time, if you would like further
information about the Fund, please go to our website at www.aegisfunds.com
for a more detailed look at the high-yield bond market and the Fund
investment approach. For your benefit, we will review the objectives
and strategy of the Aegis High Yield Fund.
The Aegis High Yield Fund seeks to earn consistent total returns in the
market that exceed our benchmark over periods of three to five years,
while striving for below-average risk compared to our peers. Our
long-term investment strategy is based on our total return objective.
We use in-depth fundamental analysis of issuers to identify bonds and
build a portfolio with the potential for capital appreciation due to
improved company performance, ratings upgrades, or better industry
conditions. We seek situations where the Wall Street appraisal of a
security value is more negative than we have determined based upon an
independent study of the facts. The bonds we purchase are not
necessarily the highest yielding issues in the market. Our goal is to
maximize risk-adjusted long-term total return.
The Fund commenced investment operations as of January 1, 2004. For its
initial year of operations, the period ended December 31, 2004, the
Aegis High Yield Fund posted a total return of 3.86 percent, compared
to a total return of 11.13 percent for its benchmark, the Lehman U.S.
Corporate High Yield Index. The Fund's closing net asset value at the
end of the period was $10.14 per share, and income distributions of
24 cents per share were paid during the fiscal year.
The Fund portfolio was in a very cautious position and maintained high
liquidity at December 31, with a weighted average portfolio maturity
of approximately three years and cash equivalents approximating 43% of
portfolio value. Financial statements for the Fund's most recent
operating period are included in this report.
As the year came to an end, the high-yield bond market was trading
(as it had for a considerable portion of 2004) at yield levels very
close to all-time lows. This was in spite of a rising level of
inflation during the year, an imbalanced global economy, and a steady
pattern of interest rate increases from the Federal Reserve Board during
the second half of the year. These historically low market yields, in
our opinion, did not come close to offering investors adequate
compensation for the risks assumed in a high-yield bond investment.
The Fund maintained a defensive position in these market conditions,
holding larger than normal amounts of cash and keeping its investments
more focused on issues with near-term maturities or call dates. This
defensive posture kept the Fund risk level at the lower end of its
range, but caused the Fund to underperform its benchmark, particularly
as the high-yield bond market rallied during the closing months of the
year. The Fund expects to continue to maintain a defensive position
until market yields rise to levels sufficient to adequately compensate
for the investment risks of high-yield bonds.
A more in-depth review of the Fund's performance and outlook can be
found in the Advisor's report that is provided to you separately.
Our decision to use this particular format is a result of the
Sarbanes-Oxley Act of 2002. Under the Act, mutual fund officers
are required to certify the entirety of each Annual and Semi-Annual
report. After some deliberation, we reached the conclusion that we are
not in a position to certify data provided by third parties, nor will
we certify any analysis and subjective conclusions drawn from such data.
Nonetheless, we strongly feel that a thoughtful and detailed
discussion of current market conditions is important to our
shareholders. Therefore, please continue to anticipate reading this
more editorial type of commentary and analysis in the Advisors Report
in the future.
We thank you for your support of this new Fund. We are pleased to
have you with us.
Aegis Financial Corporation
William S. Berno, CFA
Managing Director, Portfolio Manager
Note: All historical performance returns shown in this shareholder
letter for the Aegis High Yield Fund are pre-tax returns. Returns
include reinvestment of income and capital gains. Past performance
is no guarantee of future results. Share prices will fluctuate,
so that shares may be worth more or less than their original cost
when redeemed.
About Your Fund's Expenses (Unaudited)
Important Note:
As a shareholder of the Fund, you incur ongoing costs, including
management fees and other Fund expenses. This example is intended
to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with ongoing costs of investing
in other mutual funds. The example is based on an investment of
$1,000 invested at the beginning of the period and held for the
entire semi-annual period, July 1, 2004 - December 31, 2004.
Actual expenses
The table below provides information about actual account values and actual
expenses for the Aegis High Yield Fund.
Actual Hypothetical
(5% annual return
before expenses)
Actual
Beginning Ending Expenses Paid Ending Expenses Paid
Account Account During Period(2) Account During Period(2)
Value Value (1) Value
(07/01/2004) (12/31/2004) (12/31/2004)
$1,000.00 $1,035.48 $6.14 $1,019.10 $6.09
(1) The actual ending account value is based on the actual total return of
the Fund for the period July 1, 2004 to December 31, 2004 after actual
expenses and will differ from the hypothetical ending account value which
is based on the Fund s actual expense ratio and a hypothetical annual
return of 5% before expenses. The actual cumulative returns at net
asset value for the period July 1, 2004 to December 31, 2004 were 3.55%.
(2) Expenses are equal to the Fund annualized expense ratio (1.20%)
multiplied by the average account value over the period, multiplied by
184/366 (to reflect the period between 07/01/2004 and 12/31/2004).
You may use the information in this table, together with the amount you
invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by
the number in the table under the heading entitled Actual Expenses Paid
During Period to estimate the expenses you paid on your account during
this period.
Hypothetical example for comparison purposes
The table above also provides information about hypothetical account
values and hypothetical expenses based on the Fund actual expense ratio
and an assumed rate of return of 5% per year before expenses, which is
not the Fund s actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance
or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds. To
do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only. The Fund is a pure no-load fund and does not
charge any sales charges (loads), distribution or service fees, or
redemption fees.
Key Statistics
Average Annual Total Returns (As of December 31, 2004)
Results of a $10,000 Investment
[Line chart showing the growth of a $10,000 investment for the Fund
and the index]
Aegis High Yield Lehman HY Index
Trailing 1 Year 3.86% 11.13%
Since inception 3.86% 11.13%
(January 1, 2004)
Returns on both Aegis High Yield Fund and Lehman Index assume reinvestment
of all dividends and distributions. Fund returns are after all expenses.
Past performance is not predictive of future results. The returns shown
do not reflect the deduction of taxes a shareholder would pay on the
redemption of Fund shares or Fund distributions.
Portfolio Characteristics (Unaudited)
Industry Breakdown
Corporate Bonds 56.4%
Industrial Cyclicals 12.7%
Retail and Wholesale 1.7%
Transportation and Services 13.2%
Energy and Natural Resources 11.0%
Consumer Products 4.2%
Healthcare 6.9%
Technology and Communication 6.7%
Short-Term Investments 39.8%
Other Assets and Liabilities 3.8%
---------
Total Net Assets 100.0%
Credit Quality - % of Corporate Bonds
BBB or Higher 0%
BB 6%
B 63%
CCC 11%
Below CCC or unrated 20%
------
Total 100%
Maturity (Or Most Likely Call) - % of Corporate Bonds
Less than 1 year 18%
1-3 years 45%
4-6 years 12%
7-10 years 12%
More than 10 years 13%
------
Total 100%
Aegis High Yield Fund
Schedule of Portfolio Investments
December 31, 2004
Principal Market
Corporate Bonds - 56.4% Amount Value
--------- ---------
Industrial Cyclicals - 12.7%
Lyondell Chemical Co. Sr. Sec. Deb. 9.875% due 5/1/07 $70,000 $73,675
Resolution Performance Sr. Sub. Notes 13.50% due 11/15/10 100,000 109,250
Union Carbide Corp. Debentures 6.79% due 6/1/25 100,000 102,250
Tembec Industries Inc. Sr. Notes 8.625% due 6/30/09 100,000 101,000
--------
386,175
Retail and Wholesale - 1.7%
Marsh Supermarkets Inc. Sr. Sub. Notes 8.875% due 8/1/07 50,000 50,375
--------
50,375
Transportation and Services - 13.2%
Williams Scotsman Inc. Sr. Notes 9.875% due 6/1/07 100,000 100,500
Sea Containers Ltd. Sr. Notes 7.875% due 2/15/08 100,000 100,625
AMERCO Term Loan B Notes 9.00% due 3/15/09 100,000 106,500
Great Lakes Dredge & Dock Corp.
Sr. Sub. Notes 7.75% due 12/15/13 100,000 91,500
--------
399,125
Energy & Natural Resources - 11.0%
USEC Inc. Sr. Notes 6.625% due 1/20/06 100,000 102,000
Trico Marine Services Inc. Sr. Notes 8.875% due 5/15/12* 125,000 82,188
Southern Energy, Inc. Sr. Notes 144A 7.90% due 7/15/09* 200,000 150,000
--------
334,188
Consumer Products - 4.2%
North Atlantic Trading Inc. Sr. Notes 9.25% due 3/1/12 150,000 127,500
-------
127,500
Healthcare Products and Services - 6.9%
Healthsouth Corp. Sr. Notes 8.50% due 2/1/08 100,000 $104,250
Hanger Orthopedic Group, Inc.
Sr. Notes 10.375% due 2/15/09 100,000 103,750
--------
208,000
Technology and Communications - 6.7%
Nortel Networks Ltd. Notes 6.125% due 2/15/06 100,000 102,250
Mediacom LLC Sr. Notes 8.50% due 4/15/08 100,000 102,500
--------
204,750
---------
Total Corporate Bonds - (Cost $1,667,579) 1,710,113
----------
Investment Companies - 3.6%
Federated Prime Obligations Fund 108,497 108,497
-------
Total Investment Companies - (Cost $108,497) 108,497
---------
Short-Term Investments - 36.2%
U. S. Treasury Bill 1.81% due 2/3/05 700,000 698,839
U. S. Treasury Bill 2.02% due 2/24/05 400,000 398,806
--------
Total Short-Term Investments - (Cost $1,097,645) 1,097,645
----------
Total Investments - 96.2% (Cost $2,873,721)# 2,916,255
----------
Other Assets and Liabilities - 3.8% 117,731
-------
Net Assets - 100.0% $3,033,986
==========
* Non-income producing security due to default or bankruptcy
144A - Represents a security sold under Rule 144A which is exempt
from registration and may be resold to qualified institutional buyers
in accordance with the provisions of Rule 144A under the Securities
Act of 1933 as amended.
#Aggregate cost for tax purposes of $2,873,721.
See page 13 for notes to the financial statements.
Aegis High Yield Fund
Statement of Assets and Liabilities
December 31, 2004
Assets
======
Investments at market value (cost $2,873,721) $2,916,255
Cash 90,374
Interest and dividends receivable 29,034
----------
Total assets 3,035,663
Liabilities
===========
Accrued expenses 1,677
-----
Total liabilities 1,677
Net assets (299,284 shares of beneficial
interest outstanding; unlimited number of
shares authorized; no par value) $3,033,986
==========
Net assets consist of:
Paid-in capital $2,989,418
Accumulated net realized gain 2,034
Net unrealized appreciation 42,534
---------
Net assets $3,033,986
Net asset value per share $10.14
Aegis High Yield Fund
Statement of Operations
For the Year Ended December 31, 2004*
*The Aegis High Yield Fund commenced operations on January 1, 2004.
Investment Income
Interest $86,337
-------
Total income 86,337
Expenses
Investment advisory fees 20,008
Transfer agency and administration fees 5,558
Registration fees 6,050
Custody fees 6,653
Printing and postage costs 1,460
Legal and accounting fees 26,765
Trustees fees 15,763
Insurance and other 2,500
--------
Gross expenses 84,757
Less: fees paid indirectly (432)
Less: fees reimbursed by investment advisor (57,648)
--------
Net expenses 26,677
-------
Net investment income 59,660
-------
Realized and unrealized gain on investments
Net realized gain on investments 2,431
Change in unrealized appreciation of
investments for the period 42,534
---------
Net realized and unrealized gain on investments 44,965
---------
Net increase in net assets resulting from operations $104,625
=========
Aegis High Yield Fund
Statement of Changes in Net Assets
For the Year Ended December 31, 2004*
*The Aegis High Yield Fund commenced operations on January 1, 2004.
Increase in net assets from operations
Investment income - net $59,660
Net realized gain on investments 2,431
Change in unrealized appreciation 42,534
---------
Net increase in net assets
resulting from operations 104,625
Distributions
Investment income - net (60,057)
---------
Total distributions (60,057)
Capital share transactions*
Subscriptions 2,829,385
Distributions reinvested 60,057
Redemptions (24)
----------
Total capital share transactions 2,889,418
----------
Total increase in net assets 2,933,986
Net assets at beginning of year 100,000
---------
Net assets at end of year $3,033,986
===========
*Share information
Subscriptions 283,275
Distributions reinvested 6,011
Redemptions (2)
--------
Net increase 289,284
Aegis High Yield Fund
Financial Highlights
For the Year Ended December 31, 2004*
*The Aegis High Yield Fund commenced operations on January 1, 2004.
The table below sets forth financial data for a share of the Fund
outstanding throughout the year:
For the year ended December 31, 2004
Per share data:
Net asset value - beginning of year $10.00
Income from investment operations-
Net investment income 0.24
Net realized and unrealized gain on investments 0.14
------
Total from investment operations 0.38
Less distributions declared to shareholders
Net investment income (0.24)
------
Total distributions (0.24)
Net asset value - end of year $10.14
Total investment return 3.86%
Ratios (to average net assets)/supplemental data:
Expenses after reimbursement and 1.20%
fees paid indirectly(1)
Expenses before reimbursement and 3.82%
fees paid indirectly
Net investment income 2.69%
Portfolio turnover 21%
Net assets at end of year (000's) $3,034
(1) Ratio after expense reimbursement, before fees paid
indirectly, is 1.22%
Aegis High Yield Fund
Notes to Financial Statements
December 31, 2004
1. The Organization
Aegis High Yield Fund (the Fund) is registered under the Investment
Company Act of 1940 (the 1940 Act) as a diversified open-end management
company. The Fund is a series of The Aegis Funds, a Delaware statutory
trust established July 11, 2003. The Fund commenced operations
January 1, 2004. Through December 31, 2003, the Fund had no operations
other than those matters related to organization and registration as
an investment company, the registration of shares for sale under the
Securities Act of 1933, and the sale of 10,000 shares of the Fund at
$10.00 per share on September 29, 2003 to William S. Berno. The sale
was settled in the ordinary course of business on September 29, 2003
with the transfer of $100,000.
The Fund s principal investment goal is to seek maximum total return
with an emphasis on high current income by investing primarily in a
portfolio of corporate bonds rated less than investment grade.
2. Summary of Significant Accounting Policies
Security valuation. Investments in securities are valued based on
market quotations or on data furnished by an independent pricing
service. Short-term notes are stated at amortized cost, which is
equivalent to value. Restricted securities and other securities for
which market quotations are not readily available are valued at fair
value as determined by the Board of Trustees. In determining fair
value, the Board procedures consider all relevant qualitative and
quantitative factors available. These factors are subject to change
over time and are reviewed periodically. The values assigned to fair
value investments are based on available information and do not
necessarily represent amounts that might ultimately be realized,
since such amounts depend on future developments inherent in
long-term investments. Further, because of the inherent uncertainty
of valuation, those estimated values may differ significantly from the
values that would have been used had a ready market for the investments
existed, and the differences could be material. At December 31, 2004,
none of the Funds net assets were fair valued in accordance with the
procedures adopted by the Board. Where a security is traded in more
than one market, which may include foreign markets, the securities are
generally valued on the market considered by the Fund advisor to be
the primary market. The Fund will value its foreign securities in
U.S. dollars on the basis of the then-prevailing currency exchange rates.
Cash. Cash includes deposits held at the Fund custodian in a
variable rate account at the applicable interest rate.
Federal income taxes. The Fund's policy is to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies and to distribute all its taxable
income to shareholders. Therefore, no federal income tax
provision is required.
Expenses paid indirectly. Credits earned on temporarily uninvested
cash balances at the custodian are used to reduce the Funds custody
charges. Custody expense in the statement of operations is presented
before the reduction for credits, which were $432 for the year ended
December 31, 2004.
Distributions to shareholders. Distributions to Fund shareholders,
which are determined in accordance with income tax regulations, are
recorded on the ex-dividend date. Distributions of net investment
income, if any, are made monthly. Net realized gains from investment
transactions, if any, will be distributed to shareholders at least
annually.
Use of estimates. The preparation of financial statements in accordance
with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
Other. The Fund records security transactions based on the trade
date. Interest income is recognized on the accrual basis and includes
accretion of discounts and amortization of premiums.
In the normal course of business, the Fund enters into contracts that
contain a variety of representations, which provide general
indemnifications. The Fund s maximum exposure under these arrangements
is unknown as this would involve future claims that may be made against
the Fund that have not yet occurred. However, based on experience, the
Fund expects the risk of loss to be remote.
3. Advisory Fees and Other Transactions with Affiliates
The Fund entered into an investment management and advisory services
agreement (the Agreement) with Aegis Financial Corporation (the Advisor)
that provides for fees to be computed at an annual rate of 0.90% of the
Fund s average daily net assets. The Agreement shall remain in force
through December 31, 2005 and may be renewed for additional one-year
periods thereafter if approved annually by a majority of the
independent members of the Board. The Agreement may be terminated at
any time, without penalty, by the Fund on sixty (60) days written notice
or by the Advisor on ninety (90) days written notice. The Advisor and
the Fund have also entered into an expense limitation agreement that
provides for an expense reimbursement from the Advisor if the Fund expenses,
exclusive of taxes, interest, fees incurred in acquiring or disposing
of portfolio securities, and extraordinary expenses, exceed 1.20% of the
Fund average daily net assets. During the year ended
December 31, 2004, the Advisor reimbursed the Fund $57,648.
The Fund has agreed to repay the Advisor for amounts waived or reimbursed
by the Advisor pursuant to the expense limitation agreement provided that
such repayment does not cause the Fund's expenses, exclusive of taxes,
interest, fees incurred in acquiring or disposing of portfolio securities
and extraordinary expenses, to exceed 1.20% and the repayment is made
within three years after the year in which the Advisor incurred the
expense. As of December 31, 2004, there was $57,648 of fees available
to be recovered no later than December 31, 2007.
The Fund entered into an agreement with BGB Fund Services, Inc.,
effective January 1, 2004 to provide fund accounting, administration,
transfer agency and shareholder services to the Fund at an annual rate
of 0.25% of the Fund's average daily net assets.
BGB Securities, Inc., a registered broker/dealer, executes portfolio
transactions on behalf of the Fund. Brokerage commissions paid to
BGB Securities amounted to $480 for the year ended December 31, 2004.
Certain officers and trustees of the Fund are also officers and directors
of the Advisor and BGB Fund Services, Inc. The Fund pays each trustee not
affiliated with the Advisor fees in cash or Fund shares of $1,000 for
each attended board meeting and $500 for each attended committee meeting.
4. Investment Transactions
Purchases and sales of investment securities, excluding accrued interest,
were $1,865,283 and $199,409, respectively, for the year ended
December 31, 2004. The specific identification method is used to
determine tax cost basis when calculating realized gains and losses.
5. Distributions to Shareholders and Tax Components of Net Assets
The tax character of distributions paid during the year ended
December 31, 2004 were as follows:
Distributions paid from ordinary income $60,057
As of December 31, 2004, the components of net assets on a tax basis
were as follows:
Undistributed ordinary income $ 2,034
Unrealized appreciation 64,470
Unrealized depreciation (21,936)
Shares of beneficial interest 2,989,418
----------
Total $3,033,986
Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of short term
capital gains, on December 31, 2004, undistributed net investment
income was increased by $397 and accumulated net realized gain was
decreased by $397. This reclassification had no effect on the net
assets of the Fund.
7. Change of Independent Registered Public Accounting Firm
On July 28, 2004, Briggs, Bunting & Dougherty, LLP (BBD) was selected
to replace PricewaterhouseCoopers LLP (PWC) as the Fund s independent
registered public accounting firm for the 2004 fiscal year. The
Trust's selection of BBD was approved by both the Audit Committee
and the Board of Trustees.
From January 1, 2004 (commencement of operations) through the date of
the engagement of BBD, there were no disagreements between the Fund and
PWC on any matter of accounting principles or practices or financial
statement disclosure.
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of
The Aegis High Yield Fund
We have audited the accompanying statement of assets and
liabilities of the Aegis High Yield Fund, including the schedule
of portfolio investments, as of December 31, 2004, and the
related statement of operations, the statement of changes in
net assets and the financial highlights for the year then
ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with the standards of
the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 2004 by
correspondence with the custodian. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of the Aegis High
Yield Fund as of December 31, 2004, the results of its
operations, the changes in its net assets and its
financial highlights for the year then ended, in
conformity with accounting principles generally accepted
in the United States of America.
Briggs, Bunting & Dougherty, LLP
Philadelphia, Pennsylvania
January 25, 2005
Other Information
Fund Trustees and Officers
Business Experience
and Trusteeships
Name, Age and Address Position During the Past 5 Years
- --------------------- -------- -----------------------
William S. Berno* (51) President, President and Managing
1100 North Glebe Road Trustee Director of Aegis Financial
Suite 1040 Corporation since 1994;
Arlington, Virginia 22201 President and Director of
The Aegis Value Fund, Inc.
since 1997; President and
Trustee of the Fund
since 2003.
Scott L. Barbee* (33) Treasurer, Treasurer and Managing
1100 North Glebe Road Trustee Director of Aegis Financial
Suite 1040 Corporation since 1997;
Arlington, Virginia 22201 Treasurer and Director of
The Aegis Value Fund, Inc.
since 1997; Treasurer and
Trustee of the Fund
since 2003.
Edward P. Faberman (58) Trustee Attorney with the firm of
Ungaretti & Harris Ungaretti & Harris since
1500 K Street N.W. 1996; Director of the Aegis
Suite 250 Value Fund, Inc. since 1997;
Washington, DC 20005 Trustee of the Fund
since 2003.
Eskander Matta (34) Trustee VP of Enterprise Internet
Wells Fargo & Co. Services, Wells Fargo & Co.
550 California Street since 2002; Director of
2nd Floor Strategic Consulting with
San Francisco, California 94111 Cordiant Communications,
2001-2002; Director of
Strategic Consulting,
Organic, Inc. 1999-2001;
Director of the Aegis Value
Fund Inc. since 1997; Trustee
of the Fund since 2003.
Albert P. Lindemann III (42) Trustee Director, Faison
Faison Enterprises Enterprises, since 2000;
121 West Trade Street Real estate development,
Suite 2550 Trammell Crow Co., 1995-
Charlotte, North Carolina 28202 2000; Director of the Aegis
Value Fund, Inc. since
2000; Trustee of the Fund
since 2003.
Fund Secretary
Paul Gambal* (45) Secretary Chairman, Secretary and
1100 North Glebe Road Managing Director of
Suite 1040 Aegis Financial Corporation
Arlington, VA 22201 since 1994; Secretary of the
Aegis Value Fund, Inc. since
1997; Secretary of the Fund
since 2003.
* indicates persons who are affiliated with Aegis Financial Corporation,
the Advisor, and are therefore considered interested persons under the
Investment Company Act of 1940.
The Fund Statement of Additional Information includes additional information
about the Trustees and is available, without charge, by calling the Fund
toll-free phone number, (800)528-3780.
Form N-Q
The Fund files its complete schedule of portfolio holdings with the
U.S. Securities and Exchange Commission (the Commission) for the
first and third quarters of each fiscal year on Form N-Q. The Fund
Forms N-Q are available on the Commission website at http://www.sec.gov.
The Fund Form N-Q may be reviewed and copied at the Commission
Public Reference Room in Washington, DC. Information on the operation
of the Commission Public Reference Room may be obtained by calling
1-800-SEC-0330.
Proxy Voting
A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities is
available by request, without charge, by calling the Fund toll-free
telephone number, 800-528-3780. Information regarding how the Fund
voted proxies, if any, relating to portfolio securities during the
most recent 12-month period ended June 30, 2004 is available upon
request, without charge, by calling 888-345-1898. The Fund's proxy
voting policies and procedures and voting record are also available
on the Commission website at http://www.sec.gov.
Code of Ethics
The Fund has adopted a code of ethics applicable to its principal
executive officer and principal financial officer. A copy of this
code is available, without charge, by calling the Fund toll-free
phone number, (800)528-3780.
Aegis High Yield Fund
1100 North Glebe Road, Suite 1040
Arlington, Virginia 22201
Phone: (800) 528-3780
Fax: (703) 528-1395
Internet: www.aegisfunds.com
Board of Trustees
Scott L. Barbee
William S. Berno
Edward P. Faberman
Albert P. Lindemann III
Eskander Matta
Officers
William S. Berno, President
Scott L. Barbee, Treasurer
Paul Gambal, Secretary
Investment Advisor
Aegis Financial Corporation
1100 North Glebe Road, Suite 1040
Arlington, Virginia 22201
Custodian
UMB Bank, n.a.
928 Grand Boulevard
Kansas City, Missouri 64106
Independent Registered Public Accounting Firm
Briggs Bunting & Dougherty, LLP
Two Penn Center Plaza, Suite 820
Philadelphia, Pennsylvania 19102
Counsel
Seward & Kissel LLP
1200 G Street, N.W.
Washington, D.C. 20005
ITEM 2. CODE OF ETHICS
(a)The Registrant, as of the end of the period covered by this report,
has adopted a code of ethics that applies to the Registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the
Registrant or a third party.
(b)There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
Registrants principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are
employed by the Registrant or a third party, and that relates to any
element of the code of ethics description.
(c)The Registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
Registrants principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the Registrant or a third party, that relates to one or more of the
items set forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1)The Registrant's Board of Trustees has determined that the
Registrant does not have an audit committee financial expert
serving on its audit committee.
(a)(2)Not applicable.
(a)(3)Registrants Audit Committee has determined that it will retain
the services of an independent expert when and if such need arises.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES: The Registrant commenced operations in 2004. The aggregate
fees billed for the last fiscal year for professional services rendered
by the principal accountant for the audit of the registrant annual
financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or
engagements for that fiscal year are $10,500.
(b) AUDIT-RELATED FEES: The Registrant commenced operations in 2004. The
aggregate fees billed in the last fiscal year for assurance and related
services by the principal accountant that are reasonably related to the
performance of the audit of the registrant financial statements and are
not reported under paragraph (a) of this Item are NONE.
(c) TAX FEES: The Registrant commenced operations in 2004. The aggregate
fees billed in the last fiscal year for professional services rendered
by the principal accountant for tax compliance, tax advice, and tax
planning are $1,500 in 2004.
Tax Fees represent tax compliance services and tax consultation provided
in connection with the preparation of the Registrants federal
income tax and excise tax returns and compliance with IRS regulations.
(d) ALL OTHER FEES: The Registrant commenced operations in 2004. The
aggregate fees billed in the last fiscal year for products and services
provided by the principal accountant, other than the services reported
in paragraphs (a) through (c) of this Item are NONE.
(e)(1) Disclose the audit committee pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Audit Committee Pre-Approval Policy. All services to be performed
for the Registrant by Briggs Bunting & Dougherty, LLP must be pre-approved
by the audit committee. All services performed during 2003 and 2004 were
pre-approved by the committee.
(e)(2) The percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the
audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X are as follows:
(b) Not applicable
(c) 100%
(d) Not applicable
(f) The percentage of hours expended on the principal accountants
engagement to audit the registrant s financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountants full-time, permanent
employees was NONE.
(g) The aggregate non-audit fees billed by the registrant s accountant
for services rendered to the registrant, and rendered to the registrant s
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under
common control with the adviser that provides ongoing services to the
registrant for each of the last two fiscal years of the registrant was
NONE in 2004 and $27,000 in 2003.
(h) The registrant s audit committee has considered whether the provision
of non-audit services that were rendered to the registrant s investment
adviser (not including any sub-adviser whose role is primarily portfolio
management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to
the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii)
of Rule 2-01 of Regulation S-X is compatible with maintaining the
principal accountants independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Investment in securities of unaffiliated issuers is included as
part of the reports to stockholders filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT
COMPANIES
Not applicable
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES
(a)The registrant s principal executive officer and principal financial
officer have concluded that the registrant s disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment Company
Act of 1940, as amended are effective based on their evaluation of
these controls and procedures as of a date within 90 days of the filing
date of this document.
(b)There were no changes in the registrant's internal controls over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over
financial reporting.
Item 12. Exhibits.
(a)(1) Code of ethics, or any amendment thereto, that is the subject
of disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 are attached hereto.
- -----------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
(Registrant) The Aegis Funds
By (Signature and Title) /s/William S. Berno
William S. Berno, President
Date: February 25, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By (Signature and Title) /s/William S. Berno
William S. Berno, President
Date: February 25, 2005
By (Signature and Title) /s/Scott L. Barbee
Scott L. Barbee, Treasurer
Date: February 25, 2005